THE POLICY OF GOVERNMENT IN UNDERTAKING SERVICE AND SUPPLY.

The tendency of government to extend its functions, and its motives— The economist and the politician-The Post Office and its management―The purchase of the telegraphs-Jealousy at the functions of government-The construction of railways in England-The United States and the European continent-Arguments for and against their acquisition by the state-Mr. Mill's scheme for making the state a universal landlord―The practice of Parliament in making purchases or sanctioning them-Government as a producer-Dockyards-The defence of the system-The frauds of contractors-Precautions against them.

THERE is always a disposition on the part of governments to allege that the Administration can carry out the business of private life and private action better than individuals can. I have illustrated to some extent this habit of mind on the part of more or less permanent officials in my lecture on the limits of laissez faire. I have given some account of the facts which bring about or justify this tendency in the last lecture on the origin and development of local taxation. Now the general inclination of governments to undertake such functions is partly due to fear, partly to conceit. There are, and will be, occasions on which administrations, justly dreading criticism, wish, as far as possible, to keep certain processes of action entirely in their own hands. In Europe at present nearly all railways from the Rhine to the border of Asia owe their initiative and their control to government. the mechanism for military concentration.

They are primarily Again, it is natural

for an administration which represents the will or intelligence of the central authority to affirm that the limits of its action should be extended, that it may prudently be entrusted with details, and be allowed to supersede, or at least to control, spontaneous efforts. It must be allowed that the results of this meddlesomeness are not reassuring. I have only taken one instance of the love of interfering in a part of Europe. The consequence has been that the inevitable errors or disappointments of government are open to destructive and malignant criticism; that powerful statesmen have had to oscillate between deference to domestic discontent and deference to foreign authority, sometimes to make friends with the red international, sometimes with the black, sometimes with the yellow; and that in those parts of Europe, where the initiative has been taken incessantly, the authorities have as incessantly been met with anarchy.

It is much better, even if they disobey it in spirit, for governments, in the letter at least, to acknowledge that they are acting under a popular mandate. The effect is that by doing so they obviate any criticism beyond that of having misconceived their mission, and experience tells us that an error in generalities is more readily pardoned than one in details. I remember some time ago that an old general with whom I had a slight acquaintance told me that he had been once appointed governor of a Crown colony, in which the function which he held was coupled with that of being Lord Chancellor, or principal judge in equity. He waited on the minister to whom he owed his place, and expressed his doubts as to whether a person, all whose experiences were military, could be trusted with purely legal functions, and was assured, by being told that as long as he gave no reasons for his legal decisions, he had no cause for alarm. Now this is not a satire on law, but an eulogy of it, because it alleges that equity is natural justice. But it is also of great practical value, for as long as you let your neighbours supply reasons for your action, you are in a far safer position than you would be if you gave the reasons yourself. And by parity of reason, if you have to state the grounds on which you take up a particular line of action, the lines of action should be as few as possible. I am persuaded that much of the domestic trouble with which foreign governments have to grapple is due to the fact that they have

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taken so many initiatives, and have given so many disputable reasons for their action.

Now, though an economist should abstain from the criticism of political action, he always has to discuss social motives and practices, to search into the causes which bring about the former, and to predict the consequences which follow from the latter. The economist and the politician are equally busied with human society, but the function of the economist is limited by observation and analysis, that of the politician is to proceed to action. Public men have often had to do many things which economists naturally criticize. Economists have been known to draw conclusions which public men are constrained to disregard, or perhaps to repudiate. Perhaps the principal use of economical inferences is that which is derived from what I am in the habit of calling negative inductions, under which it is shown that premises, in the first instance seductive or attractive, have disastrous effects. Not much less valuable are the positive inductions, by which it may be shown that private rights, admittedly sacred up to a certain point, may, if carried to excess, inflict serious evils on society. The earliest economists, notably Adam Smith and his predecessors in France, chiefly elaborated negative inductions. The best efforts of their successors have been directed to those positive inductions which discover the strain that will be put on society by the undue acceptance of private rights. You will remember that, on very high authority, modern writers of a more rigid school, who have insisted on the acceptance of their conclusions in practical life, have been recommended to betake themselves to Saturn.

Now I have made this short preface to my lecture to-day in order to point out to you that a prudent administration will be very cautious in either directing private enterprise or in rivalling it. The less it takes in hand, out of its legitimate sphere, of adjudicating, through the machinery of Parliament, on the best means for reconciling contending claims, the less does it invite adverse criticism. The function of such an equitable interpretation is difficult enough, and the decision will constantly be challenged. But it has to be made, even though long, and perhaps useful, delay is occasioned by the collection of evidence. But to undertake many more offices than that of a judge in equity on the principles of

legislation, where the parliament, with the administration, is competent to take evidence and arrive at a decision, is the acceptance of a function which needs a constant apology. Now, there are occasions on which the apology is complete, and the public admits that government has rightly appropriated to itself the supply of certain services. It is much more disputable whether government is ever wise in undertaking the economical function of production. Almost all the evidence as to the latter action is hostile to the practice. An examination of instances is the best means of arriving at reasons for determining on general rules.

The supply of a service is best illustrated by the Post Office. The origin of this institution was quite as much a measure of police, as it was to serve a commercial convenience. It was instituted under Cromwell's government, and the Act of the Commonwealth which created it states that it was to be "for the benefit of commerce, for the conveyance of government despatches, and for the discovery of wicked and dangerous designs against the commonwealth." The Act of 1657 was ratified at the Restoration, and the Post Office soon became a notable source of royal revenue, being early charged with pensions. The convenience of the service was great, and it was soon made compulsory, the rates charged for conveying letters being very high, though comparatively slight when contrasted with the old cost of sending them by private hand. In course of time the Post Office profits were transferred to the general revenue. In 1840 the rate was reduced on the plea that the distribution, and not the weight of the letter, was the principal charge on the service. It was supposed that the revenue under the new system would soon equal the amount received under the old, but this did not happen till after the lapse of a considerable time. Hence the experiment was deemed premature by Peel, who foresaw that no little experimental boldness would be needed, in order to get rid of annual deficits, and make the revenue elastic.

The economical defence of the Post Office system is that a service is performed by the government with a punctuality, dispatch, speed, and certainty which could not be achieved by individuals under any competitive system, and that in this function, at least, a state monopoly of service is thoroughly justified. It is further alleged,

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that through this agency a cheap service is carried out indeed, but that by the fact of the monopoly a considerable revenue is also acquired. Now it is highly probable that a considerable part of this contention is correct. The government was anxious to secure, under the old system, a notable revenue. But however thoroughly Parliament would have granted them a monopoly of collection and distribution, it is certain that the results to the government would have been disappointing if those ends to which I have alluded had not been satisfied, and that the Post Office would have had interloping rivals, as indeed to some extent they did have under the old rates. But much of the success which has attended the Post Office in this country is due to the constant public criticism to which its details have been subjected and its efficiency examined. This criticism, too, came from exactly those classes whose influence any government would have been anxious to conciliate, and unwilling to offend. The Post Office, in short, is as much the work of the people as it is of government, for it owes its usefulness and therefore its efficacy, to the constant supervision it submits to.

The peculiar position which a government occupies towards the people whose affairs it administers has made it decline to become a bailee, that is, to be responsible for the safe delivery of that which it conveys. The fact is important, as it shows how cautious a government should be in competing for a service which might be satisfied by private hands, unless it has an exceedingly strong case to show. Now it is part of the Common Law that a common carrier is liable for the goods which are entrusted to his custody, though this liability has been from time to time limited, unless special terms are made with him for transmitting articles of extraordinary value. But soon after the Post Office was instituted, as early as the reign of William III., the judges decided that the Post Office was not liable for the safe delivery of letters, and the case has been determined again to the same effect. The reason, I apprehend, is to be found in a well-grounded suspicion that the Post Office would be treated more harshly by juries than common carriers would be, and that in consequence the liability must be entirely repudiated, because the contingency would assuredly be abused. Even now-when the business of the Post Office has been so greatly extended in several new directions, now that it has become banker,